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Markets Pulse

Oil Tumbles Below $85 a Barrel

By Jerry A. DiColo

Crude oil tumbled 4.8% as swelling fuel supplies and weak demand due to superstorm Sandy weighed on a market already pressured by a postelection selloff.

U.S. stockpiles of oil and gasoline jumped last week as Sandy derailed shipments of fuel into the East Coast and forced refineries to shut down, according to data released Wednesday by the Department of Energy.

The report helped confirm that Sandy has had a bigger effect on demand than supply despite long gas lines across New York and New Jersey. Gasoline stockpiles rose by 2.9 million barrels, while East Coast demand for gasoline and other fuels fell 6% last week, the data showed.

“The market was surprised by the gasoline build,” said Gene McGillian, a broker at Tradition Energy. “There’s ample supply.”

Light, sweet crude for December delivery fell $4.27, to settle at $84.44 a barrel on the New York Mercantile Exchange, the lowest settlement level since July and the largest one-day drop in nearly a year. Brent crude oil on the ICE Futures Europe exchange dropped $4.25, or 3.8%, to $106.82 a barrel.

Front-month December reformulated gasoline blendstock, or RBOB, declined 11 cents, or 4.1%, to $2.5889 a gallon. December heating oil dropped 9.08 cents, or 3%, to $2.9621 a gallon.

Oil and fuel products fell along with stock markets, copper and other assets dependent on a continued economic recovery in the wake of the U.S. election Tuesday.

Investors said President Barack Obama’s victory paves the way for a partisan battle over what is known as the “fiscal cliff,” a series of automatic tax increases and spending cuts that take effect Jan. 1, which could damp economic growth or possibly lead to a recession.

Political brinkmanship likely will continue to weigh on financial markets, said Jason Schenker, president of Prestige Economics, a forecasting firm. “We’re going to get more of this ‘kick the can down the road’ sort of thing,” he said.

Oil prices have been on a steady decline since peaking at $99 a barrel in mid-September. Rising supplies from the U.S. and other regions have come amid falling demand as the global economy has appeared to weaken. The increase in U.S. gasoline stockpiles, after analysts had expected a drop, was due to a large inventory increase along the Gulf Coast.

The Colonial Pipeline, which sends fuel to the Northeast from Gulf refineries, was closed for several days last week after the storm flooded gasoline-distribution centers around New York Harbor. And traders and analysts said a nor’easter hitting the New York area Wednesday and Thursday could lead to another dip in demand as drivers stay off roads.

Sandy “was a shock to the system, and the storm we’re getting today is going to roll us again,” said Mike Guido, head of energy hedge-fund sales at Macquarie in New York.

In other commodities markets:

WHEAT: Prices rose to a one-month settlement high, buoyed by concerns about unfavorable weather for crops growing in the U.S. and abroad.

Traders cited concerns ranging from dry weather in the central U.S. to too much rain in Europe and Argentina.

December wheat on the Chicago Board of Trade rose 17 cents, or 1.9%, to settle at $8.94 a bushel. Kansas City Board of Trade December wheat settled up 12 cents, or 1.3%, at $9.3150 a bushel.